Money Glee Monday #10 - To mix or to not mix?

If you've come across this post, no this is not about mixing cocktails or becoming a DJ, although you're more than welcome to stick around if that's what you were after.

If you would like to read more about investing 101, check this out!

There is a big and on-going discussion on whether it is more important to diversify your investing as opposed to specialising and putting all of your eggs in one basket. This certainly is no a new debate however let's take a look at both sides

Why diversification is promoted

  • ou're avoiding putting all of your eggs in one basket. This means that if one asset class i.e. cash has a bad year or decade you are not exposed to one investment asset
  • Unless you're an expert you probably don't understand enough about one type of investment to put all of your money in it
  • It can possibly take less time due to not needing to rely on one asset class for all of your investment outcomes

Why specialising (in one investment) is promoted

I fear not the man who has practiced 10000 kicks once, but I fear the man who has practiced one kick 10000 times - Bruce Lee
  • As Bruce Lee mentioned, if you focus on too many things you are not to be feared or in investment terms successful. 
  • The K.I.S.S (Keep It Simple Stupid) principle could apply here, where if you stick with one thing that you know may provide you an edge
  • You may avoid attracting additional transaction fees by placing your investments in one place
Occasionally you need more than one tool and others one tool is fine

Occasionally you need more than one tool and others one tool is fine

What's the verdict then?

As in most situations it will need to be determined and decided by the person who knows you best, you! Despite saying this generally diversification may lead to reducing the amount of risk you are taking on, while at the same time potentially reducing the amount of return you could receive.

Speak with a financial "expert"

Before you implement any of the above information speak with a financial advisor who can take your personal circumstances into account. It's important though to consider that an advisor is not always neutral and where / who they are being paid by!

What are your thoughts on diversifying vs. specialising?

What questions do you have about money, finance and goals?

We'd love for you to share, like and comment to help us help more people.

Remember to live your Money Glee!